Rio terminates Chinalco deal

05 June 2009
Mining major Rio Tinto Plc has terminated its $19.5-billion planned deal with Chinese resources giant Chinalco, and the company has placed its shares under a trading halt today. (See: Chinalco invests $19.5 billion in Rio Tinto to raise stake to 18 per cent).

In a statement to the Australian Stock Exchange, Rio Tinto manager James Gerraty said the trading halt announced before the market opened on Friday would remain in place until 9 June, or pending the release of a final announcement by the company.

Rio Tinto also said it has decided to raise $15.2 billion through a rights issue to solve its debt problems.

It has agreed with rival BHP Billiton for a 50:50 joint venture to develop Western Australian iron ore mines. BHP has agreed to pay Rio US $5.8 billion for equity type interest. The miner said it expects to realise more than $10 billion in synergy benefits.

''Since we announced the Chinalco transaction in early February 20, financial markets have seen a significant improvement. This has had two consequence; firstly the financial transactions with Chinalco became markedly less valuable, and secondly our ability to raise a level of equity appropriate for our needs on attractive terms have improved very considerably,'' said Jan du Plessis, chairman of Rio.

''Given these new circumstances, and coupled with extensive feedbacks we have had from shareholders and others, the boards have concluded that the formation of an iron ore production joint venture in Western Australia with BHP Billiton, together with the rights issue deliver the best solution,'' Plessis added.

Rio Tinto will pay Chinalco a deal break fee of $195 million.

The rights issue consists of 21 new shares for every 40 existing shares at 1,400 pence each to raise approximately $15.2 billion, the company said. This will reduce Rio's net debt to $23.5 billion.

Rio, which rejected a hostile offer from BHP in November, is cutting jobs and trying to sell assets. The issue will enable the group to meet its Alcan facility debt repayment obligations due in October 2009 ($7.15 billion) and in October 2010 (as on 30 April 2009, $8.1 billion was drawn under this tranche).

At $15.2 billion, the rights offering would be the second- biggest this year after HSBC Holdings Plc, which sold $18.3 billion of stock in April.

Rio Tinto last swapped hands at $69.90. BHP Billiton shares rise over $2 at $36.80 immediately after trading began today.

Rio, which has a market value of US$68 billion as on 31 March, turned to Chinalco in February to help repair a balance sheet weighed down mainly through the 2007 purchase of Alcan Inc.

Under the scrapped deal, Chinalco would invest $12.3 billion in joint investments in aluminum, copper and ore mining with Rio Tinto, and spend $7.2 billion on convertible bonds in the company. If redeemed for shares, the bonds would almost double Chinalco's existing 9.3 per cent stake in Rio Tinto Group to 18 per cent.

But there has been speculation about the status of the deal for several weeks as the market has changed significantly since the deal was first struck.

The proposed deal with Chinalco, China's largest overseas acquisition and Australia's biggest asst takeover, has also sparked opposition in Australia, amid concerns that a foreign state-backed enterprise would own a strategic stake in the country's biggest natural resource assets. (See: Rio Tinto's majority shareholders oppose Chinalco deal at UK AGM).

Australia's Foreign Investment Review Board was due to make a decision on the deal by the middle of this month.

Rio and BHP are the world's second- and third-largest iron ore producers, while Brazil's Vale SA is the largest iron ore producer. China is the biggest steelmaker.

Certainly Right issue worth nearly $15 Billion doller is not an easy task under current global turmoil which has hunted financial world very tremendously. This particuler Rigth issue will give major boost to the stock exchange around the world which can jump upon the renewed hopes of high liquidity in the market. Take over of this Australian firm may have sent alarming singals to Dow Jones Industrial index which has seen some revival about touching the bottomline.

This is significant. Particularly in the backdrop of the Unocal debacle in 2005, the failure of this takeover - with all its political connotations - could have a significant impact in terms of decelerating larger outbound M&A activity in China by putting a considerable dampener on the Chinese appetite for overseas acquisitions, as it has in the past, atleast in the short term. As Robert Chu, the head of Sullivan & Cromwell's head office in Beijing puts it, "The question Chinese parties might raise in connection with any kind of deal is whether the Chinese party is being taken for a ride or being used as a stalking horse with other parties."

In Australia atleast, this development has been greeted with great enthusiasm and relief, as the prospective deal was widely opposed by wide sections of both the public and political parties from the outset. The ASX infact rose a whole percentage point on the back of optimism over RioTinto's decision to enter into a joint venture with Billiton. And Rudd's government will be glad it has been spared the touchy imperative of making a potentially fractious -and contentious decision at a time when it is coming under fire on various issues from various quarters. It remains to be seen now whether the preliminary agreement with Sichuan's Tengzhong Heavy Industrial Machinery for the takeover of Hummer will play out. And what consequences this decision has for the relationship between the miner and its largest customer.

Ian Verrender, writes of the end of the deal with Chinalco in the Sydney Morning Herald: "It was a deal that stank. It was a deal constructed in haste. And it was a deal designed to deliver the board and management from a disaster of their own making."

THE arrest and detention in Shanghai of senior Australian Rio Tinto executive Stern Hu represents a grave crisis in Australia's relationship with China.

It is a serious miscalculation by Beijing, and threatens to do lasting harm to China's interests, not only in Australia, but throughout the Western world.

Rio Tinto is one of the biggest mining companies in the world. Recently it has earned the ire of official China (China Inc, as it's sometimes described) in two ways.

It has pulled out of a huge deal in which the wholly Chinese government owned Chinalco was going to buy nearly $20 billion of Rio. And it is involved in tense negotiations over iron ore prices.

And now Rio's number two man in China, a Chinese Australian, and three of his Chinese employees, are in custody, ludicrously on suspicion of espionage and stealing Chinese state secrets.

Often when the Chinese state is under stress it reverts to Cold War rhetoric and indeed Cold War impulses.

But really, to arrest a senior Rio executive for espionage? In 2009?

This surely is 30 years out of date.

These arrests always tend to be of ethnic Chinese, no matter what their citizenship, as though Beijing does not recognise the foreign nationality of anyone of Chinese blood.

But if Australian executives cannot have difficult business dealings and negotiations in China without being arrested, this is a grievous development.

The story has been reported widely internationally, on various forms of media including CNN and Bloomberg.

Rio is a giant in the mining world. If Chinese authorities capriciously detain executives from companies such as Rio, what lessons will the international business community draw from this?

Most of all, however, this is a crisis for the Rudd government. There is an air of contempt in the way the Chinese authorities have failed to respond to Australian government requests for information and for consular access to MrHu until today.

What does the much touted Australia-China relationship add up to if Beijing treats Canberra with such conspicuous discourtesy and indifference? Or, more likely, are the Chinese deliberately sending a message? If so, it's a chilling message.

If the Rudd government cannot secure Mr Hu's release within a few days, it will be seen as having zero influence with Beijing.

Kevin Rudd's ambition to be a "zhengyou" to China, a good friend who can tell even unpleasant truths, will be torn to shreds.

If the Rudd government cannot resolve this matter quickly, then every positive thing it ever says about its relations with Beijing will not be worth the hot air they take to say.

The frequent talk of a special relationship between Australia and China will be seen as fatuous sentimentality.

But the Chinese are risking serious interests as well.

Their action against Mr Hu greatly strengthens those such as Nationals Senate leader Barnaby Joyce who argue against any strategic partnership between Australia and China, while China's many apologists in Australia will be deeply discredited.

Article from: The Australian
THE Chinese government has sent a message of crude intimidation and deep displeasure against Australia with the arrest of Rio Tinto executive Stern Hu, an Australian citizen, in Shanghai.

All the facts are yet to come to light, but the context and sequence of events are undeniable. Rio Tinto deeply angered Chinalco, the Chinese government-owned corporation, by walking away from a $20 billion partial sale of its key assets. Rio was denounced in the Chinese press as a "dishonourable woman". Officially and unofficially, in the media and in business and diplomatic contexts, Beijing made its fury well known.

This would have been China's largest overseas investment. Following the US refusal to allow China's National Offshore Oil Company to buy the US group Unocal, the Rio deal is the second-biggest foreign investment, after Unocal, to fail.

Second, the China Iron and Steel Association was extremely bitter at the way iron ore price negotiations were going. The Chinese wanted the Australian government to fix the price, as the Chinese had before when prices soared during the resources boom. The Chinese wanted the price to fall by 40 per cent, whereas other key Asian markets had accepted a 33 per cent fall.

Then, on Sunday, officers from the Shanghai State Security Bureau arrested Hu and three of his Chinese executives. At first they were accused of espionage. This led to the Australian government's very precise wording in response. Foreign Minister Stephen Smith repeatedly said the government and Rio were "surprised" at the charges. He also said the government was "perplexed" at them.

Australian governments of both parties have a longstanding convention that they neither confirm nor deny espionage allegations. However, the use of words such as surprised and perplexed was the government's way of saying the espionage charge was ridiculous.

Finally, yesterday, the Chinese Ministry of Foreign Affairs spokesman made various statements on the Hu case and the Shanghai State Security Bureau posted several paragraphs on the matter on its official website.

These refined the charges against Hu and contained specific allegations that he had bribed local officials working for Chinese entities - that is to say, not employees of Rio - and that he and the others in detention had stolen Chinese state secrets. Article 8 of the Chinese State Secrets Law includes matters relating to "national economic and social development".

Smith yesterday seemed to give vent to some of Canberra's intense frustration with Beijing over this matter at a difficult press conference, where he said: "Now, for the first time in a number of days, we see some underlying basis or reason for the detention."

Then Smith politely but pointedly made a remark about the process the Chinese had followed: "This has been received or gleaned from public statements or posting of official statements on websites and not yet directly from Chinese officials.

"Two things are clear. Firstly, Mr Hu is now at risk of being subject to Chinese legal, judicial and criminal procedures, and secondly, the Chinese state and the Chinese authorities take a much broader view of what state secrets or national security might be than, for example, Australia or other nations apply."

Although Smith did not go on to make the point, it is clear Beijing is being wholly unreasonable in claiming that commercial negotiations constitute espionage, as though Chinese negotiators don't try to work out their negotiating partners' positions. Smith seemed to be alluding to this later in the press conference when he said: "Frankly, it's difficult for a nation like Australia to see a relationship between espionage or national security and what appear to be suggestions about commercial or economic negotiations."

Is there the remotest chance that these charges against Hu have some integrity and are not a political move against Australia deliberately carried out by the Chinese government? The answer is clearly no, and as a result this affair constitutes a major crisis in the Australia-China relationship.

There are several reasons for concluding that this is a deliberate political move by Beijing aimed at intimidating and disciplining the Australian government, and as such is a test of character and effectiveness for the Australian government.

First, there is the fact that Hu was arrested on Sunday. But the Chinese chose to determine that his detention began on Monday, so that under the terms of a consular access agreement Beijing and Canberra signed in 2000, they did not need to allow him consular access until yesterday.

Australian officials had sought consular access from Sunday and asked the Chinese for full information, but they got nothing. Canberra officials, including the Prime Minister and cabinet ministers, had to wait until the Chinese made public statements yesterday before they got any indication of what Hu had allegedly done wrong. Nor were they initially told where he was being held.

These are clearly not the actions of a friendly government.

Further, imprisoning a senior Rio executive is a serious step. China is not a nation in which decisions of grave international political and commercial consequence are taken on a decentralised basis. Well-informed independent observers point out that it is inconceivable that this decision was taken in Shanghai rather than Beijing. Given the importance of the Rio matters, it is safe to assume that the decisions were taken at the very highest level of the Chinese government.

It also follows that the decision about the way the detention would be carried out - the refusal to communicate substantially with Australian officials at any level - was also approved at a high level.

Any friendly government would have behaved entirely differently. It would have got in touch with Australian officials almost as soon as the arrest was made to say, "Look, we've found one of your most senior people involved in criminal activity, we've had to arrest him, we'll handle the matter with all the appropriate courtesies, but we don't want you to be blindsided by any stark surprises in this regrettable business."

The fact that the Chinese went out of their way to humiliate and rebuff Australian officials, and more broadly the Australian government, shows their clear intent to send a message to Canberra.

This is the way the matter looks to virtually all independent observers. There is no other credible interpretation. Will Hutton, the former editor of Britain's The Observer newspaper, gave a representative and more or less definitive judgment on Lateline on Thursday night. He commented: "Fifty-seven strategic industries are ones the Chinese want to protect, and they do protect them and advance them. This is a country where, when they had the reflationary package, 16 per cent of the reflationary package was set aside for so-called administrative fee. What that is, is bribes and kickbacks to officials."

Specifically on the Rio matter, Hutton judged: "This is the most political place on earth to do business. It is full of bribery and chicanery, and another reason, by the way, that until that starts to change, doing business in and doing business with China is very problematic ... They (the Chinese) can throw their weight about and are throwing their weight about with RTZ (Rio Tinto). Absolutely anyone who thinks any different, you know, I just think the evidence is there before your eyes."

In all of this, the easy temptation will be to criticise the Rudd government. Certainly the opposition is right to make a fuss. If the Australian political culture does not react strongly to the capricious and obviously political jailing of a senior Australian executive, then we are a feeble people. And of course it will be easy to juxtapose Rudd's Chinese expertise and claimed effectiveness with China with the ugliness, crudity and aggression involved in this incident.

However, this whole horrible incident so far reflects no discredit on the Rudd government. It is very similar to the extraordinary campaign the Chinese waged against the Howard government after Howard supported the US decision to dispatch two aircraft-carrier battle groups to waters near Taiwan to prevent Chinese intimidation of a Taiwanese presidential election and its aftermath.

The Howard government had done some other things to annoy the Chinese, such as John Howard receiving the Dalai Lama. The Chinese government retaliated by banning high-level official visits to Australia and ran an almost insane press campaign against Australia, with the People's Daily at one point declaring that Japan and Australia were "two crab claws encircling China".

The campaign worked. The political culture in Australia polarised against Howard and blamed Howard for the breakdown in relations. Almost never again did Howard venture any public criticism of China. The dragon had tamed the kangaroo.

Rudd, notwithstanding his deep knowledge of China, has been sensibly independent of Beijing. He has done a lot of pro-Beijing things, such as visiting Beijing before going to Tokyo and arguing for greater Chinese representation at the International Monetary Fund. But he has also done a lot of things that annoy China: meeting the Dalai Lama, speaking out against Chinese human rights abuses, authorising a defence white paper that points to the consequences for Australia of China's huge arms build-up, not rushing through approval for Chinalco's investment in Rio, and not interfering in iron ore price negotiations. But these were all sensible and moderate decisions, and not remotely gratuitously provocative.

Thus it would be profoundly counterproductive to lay all blame for what is undoubtedly a crisis in the relationship on the Rudd government. The challenge for Rudd is now twofold. He must get Hu out of jail; anything less would be a travesty. And he must bring the overall relationship back on an even keel without becoming a supplicant or bending the knee to Chinese power.

It does seem that China's investments are not really welcome in the developed countries. The Australians opposed to the deal even ran advertisements about the Tienanmen square to nix the deal!

Perhaps China is not able to convince people that the deals are purely commercial in nature. Remember the same kind of opposition was shown by the Europeans to Mittal steel takeover of Arcelor. Even though Mittal steel was a European company.

It does seem to be a but hypocritical on the part of Western countries to want a level playing field for their corporations all over the world and not providing the same to corporations from the developing world.

^^Western countries are the hypocrites when it comes to threat to their assets/interests. There are many examples of such instances.
>Giving subsidies to their own farmers but ordering developing countries to not do so and effectively furthering their country interests.
>Prohibiting the takeover of Unocal by China.
>And now collapse of Rio Tinto deal

But China is not lagging behind in this business. It has prevented the takeover of Chinese juice maker company Huiyuan by Coca-cola.

In most if not all cases of industrial/economic matters it is very simplistic to suggest that just Western nations are hypocritical. Looking at many things it applies to most nations in the world.

As far as the Rio deal goes there are specific legal issues within the Australian systems relating to non Australian companies holding quantities of shares/control of Australian companies. The Rio deal collapse was a decision by the share holders not the government. There is a strong chance that even if it have been a US company instead of a Chinese one the deal would have carried the same level of negativity.

What has not been mentions so far is the fact China has also arrested members of China's steel companies.

CHINA has rebuffed the Rudd Government and may force Australian officials to wait a further month for a second visit to detained Rio Tinto iron ore executive Stern Hu, The Australian reports.

As senior Australian ministers warned that China risked damaging its international trade relations over Mr Hu's arrest, reports emerged that Rio Tinto was seeking as much as $9 billion in compensation for breach of contracts from Chinese steel mills.

Foreign Minister Stephen Smith yesterday criticised Chinese efforts to communicate with the Rudd Government over the Hu case.

"We would have preferred that much of the information we have gleaned would have come from Chinese officials in the usual and normal diplomatic way, rather than it coming from the public statements of the spokesperson from the Ministry for Foreign Affairs and from an official Chinese Government website detailing the advice of the Shanghai Bureau of State Security," Mr Smith said.

Chinese-born Mr Hu, the head of Rio Tinto's iron ore operations in China, and three other senior company officials were arrested in Shanghai by secret police and have been detained for a week without charge or legal representation.

Chinese officials have accused Mr Hu of espionage and stealing state secrets, sparking the most serious diplomatic challenge faced by the Rudd Government since it came to office in November 2007.

It is now clear that the allegations against Mr Hu and his colleagues are directly related to prolonged and unresolved negotiations over benchmark prices for iron ore being sold by Australian miners to Chinese steel mills.

Chinese media reports said Rio - and possibly its one-time rival and new joint venture partner BHP Billiton - had been approaching Chinese steel mills in the past month, seeking compensation for broken contracts after the steel makers allegedly reneged on promises to buy certain volumes of iron ore.

"From the middle of June, Rio visited Chinese mills one by one, asking for compensation for contracts which were not fulfilled due to the financial crisis," the 21st Century Business Herald quoted an unnamed senior steel executive as saying.

"Rio calculated that they lost $5 billion in iron ore, and $4bn in shipments in the previous eight months due to the fact that Chinese mills postponed or even cancelled ships."

A Rio spokesperson declined to comment.

Mr Smith played down hopes of an early release for Mr Hu, warning that he was preparing for the "long haul".

"I am deliberately and advisedly making the point that under Chinese law and Chinese practice, Mr Hu is now subject to those processes," he said.

The month-long wait for another consular visit comes after Trade Minister Simon Crean, visiting Shanghai on Saturday, was granted access only to a mid-level official, Sha Hailin, the deputy secretary-general of the Shanghai government, to express his "strong concern" about the Hu case.
Mr Smith, asked if Mr Hu's detention could scare off foreign investors in China, said Beijing needed to "think very carefully about what implications, if any, it has for the international business community and the international investment community's view of China".

"I think one of the issues for the Chinese government to contemplate is the extent to which the circumstances of this case will cause the international business community any cause for concern," the Foreign Minister said.

The opposition continued to attack the government's response to Mr Hu's detention.

Opposition foreign affairs spokeswoman Julie Bishop said China had effectively "snubbed" Australia.
She accused Mr Smith of failing to act decisively with the Chinese and said he was now being treated with disrespect by Beijing.

"The government ministers must get personally involved and not just leave this to the bureaucrats and say that this is just a consular matter," she said.

Bauxite is moved onto the stockpiles at Lorim Point, Rio Tinto's Alcan Mining Operation at Weipa, in northern Queensland. Mining giant Rio Tinto on June 5, 2009 cancelled its controversial tie-up with China's Chinalco in favour of a joint venture with fierce rival BHP Billiton and a $15.2 billion rights issue.

Xiong Weiping, the chief executive officer of China's largest aluminum company, Chinalco, spent the better part of the last four months doing something no other CEO of a state-owned Chinese company had ever done. He campaigned — in an open, very western way — to gain approval in Australia for what would have been China's largest foreign investment ever: a proposed $19.5 billion stake in Rio Tinto, the world's second largest mining company. The deal would have given Chinalco roughly an 18% stake in Rio, as well as outright control of some valuable copper and iron ore mines. Xiong travelled to Australia in March and made television appearances to plead his case. He pressed the flesh with politicians in Canberra who were both for and against the deal.

It was a bravura performance. It was also unprecedented. Outsiders should understand: big, state-owned companies in China (and most everywhere else) tend to be stodgy, intensely conservative organizations. Often, top executives will practically read from a script prepared for them by minions when meeting foreigners. Not Xiong. (See pictures of Chinese investment in Africa.)

A lot of good it did him. On June 5, Rio Tinto told Chinalco that their deal would not go through after all. It would, instead, float a rights issue to raise money needed to pay down a massive debt load, as well as enter into a joint venture with BHP Billiton — the mining giant that last year tried to buy Rio outright. Xiong, in a statement issued by Chinalco, simply said he was "disappointed" at the outcome.

Analysts were quick to argue that this was not a rerun of China's ill-fated attempt to buy the American oil company UNOCAL four years ago, political opposition in Washington led CNOOC to withdraw its bid. This deal, they said, fell apart for economic — not political — reasons. The proposed Chinalco investment came when global commodity prices were at their nadir; BHP had walked away from a merger with Rio a few months earlier, and the company was in sudden and desperate need of cash to cope with a nearly $40 billion debt burden.

Now, minerals prices have rebounded — in part (and ironically) because of a huge government spending binge in China that has had companies here frantically restocking their supplies of copper, iron ore and other commodities used in industrial production. "The biggest driver of discontent [with the Chinalco deal] among Rio shareholders," says Grant Craighead, managing director of Australia-based independent research group Stock Resource, "was that the deal was being struck close to the low point in the current financial crisis. Over recent months the market decided that the worst of the crisis was over, and life's likely to get better. The Chinalco deal went from looking like a win-win to looking a bit cheap," he says.
That may be true, but the outcome is going to leave a bitter taste in the mouths of some Chinese executives and policymakers. They are all too aware that this proposed Chinese investment had become a big political football in Australia — in a manner, indeed, that dwarfed the fireworks in the U.S. when state-owned CNOOC tried to acquire UNOCAL.

Opponents of the Australia deal went so far as to sponsor television commercials that actually invoked the June 4, 1989 massacre in Tiananmen Square. A banker close to the Chinalco side of the deal said management there was "deeply disappointed" by some of the rhetoric used by opponents of the deal. In fact, this source says, Chinalco had in many respects "gone to school" on the CNOOC deal, in terms of "what not to do." Unlike CNOOC's attempt to buy UNOCAL outright, this was a minority investment, welcomed — at first, anyway — by Rio's management. There was the PR charm offensive by Xiong, who went to great pains to convince Rio's stakeholders that his aims were strictly commercial and that there was no hidden agenda to buy up supply in order to keep transfer prices down later, as many critics contended.

The Rio decision to walk away spared the government of Kevin Rudd, the Mandarin-speaking Prime Minister of Australia, from having to make the tough decision as to whether to let the Chinalco investment go forward. After the Rio announcement, Rudd made a point of saying that Australia was very much open to foreign investment, and then met in Canberra on Friday with Xiong to reinforce the point. Analysts say the government was likely to approve the investment, but only after imposing what surmised would be "tough conditions." It s still unclear what those "conditions" might have been.

Even though the economic rational for nixing the deal muted criticism in China today, the way it went still stings in Beijing. If a private sector company in the west had proposed buying a minority stake in Rio Tinto, would the Australian review process have taken as long? Or it would it have been waived through much more quickly — before commodity prices recovered? Now, far from gaining access to a giant iron ore reserves, Chinalco has to watch the two biggest producers in the world — BHP and Rio — do a joint venture with their reserves in the famed Pilbara region of western Australia. It's no wonder that the executive director of China's iron and steel institute was warning about a possible "monopoly."

The deal's outcome also leaves another basic question unanswered: What is China going to do with all of it's money, if the developed world sends signals that it doesn't really want it — at least in forms other than investments in US Treasury debt? One of the things a country with more cash than it can possibly invest at home — a description which China fits in spades — does is recycle its surpluses is through foreign direct investment. And China, in fact, has done scores of resource deals in the developing world — of late with Russia, Kazakhstan and Brazil in the old and gas sector, for example. But twice now in the developed world, big Chinese investments have been spurned. First CNOOC, now Chinalco.

Rudd insists Australia remains open for investment from all comers. And that may well be true. But whether the Chinese remain interested in Australia might be another story. Recently, Fu Chengyu, the CEO of CNOOC and the man who tried to acquire UNOCAL in 2005, told reporters from TIME and Fortune that his company was still keenly interested in overseas investments. And then added, smiling, "though not in North America." Not in North America? he was asked. Not a chance? His smile dissipated a bit, and he said, simply: "No." Any guesses as to why that would be?

This is one of the big issues with the china deal:
"The deal would have given Chinalco roughly an 18% stake in Rio, as well as outright control of some valuable copper and iron ore mines"

The other was the mater of board membership and concerns that there would be a deliberate intent to give China preferred deals re ore prices.
China tried to say their board member would be non voting and there was no intent to "work" prices.

Most of this did not wash with the Rio share holders, government and public and in essence BHP.

Also there needs to be a realisation iron ore does represent a strategic resource.